Commission to press ahead with PPI ban

14th May 2010 08:18

The Competition Commission is to push ahead with a ban on the sale of payment protection insurance (PPI) alongside credit cards and personal loans.PPI is most often sold when a consumer takes out credit and the watchdog says that selling insurance at this point-of-sale gives the PPI supplier an unfair advantage.The point-of-sale ban was originally proposed for early last year, but the Competition Appeals Tribunal required the Commission to show it would not inconvenience customers after Barclays, Lloyds and Shop Direct challenged the move.The Commission said today that after detailed analysis it concluded that the ban would mean greater competition and choice and lower prices to the market. These would outweigh the disadvantages, in particular the potential inconvenience to some customers."We found that many customers would place very significant value on being given the time and space to choose the right PPI product-or indeed to decide that PPI is not right for them," inquiry chairman Peter Davis said."PPI customers currently have little choice and prices are high because competition is very limited. It is notable that even in the depths of the recession following the financial crisis we found that the economic profits of PPI distributors remained significant," he added.One change to the original plan is that the Commission has left retail PPI out of the ban as it was not clear it would outweigh the disadvantages.The Commission said that retail represented 2% of the market for PPI, mainly through catalogue providers, and that the payments were generally too small to justify spending time looking for a better deal.PPI covers repayments on credit products if the borrower is unable to make repayments due to accident, sickness, unemployment or (in many cases) death.In its 2009 report, the Commission found the vast majority of the UK's 12m PPI policies are sold at the same time as a consumer takes out a loan, credit card or other type of credit.The Commission added that PPI suppliers repaid £177m after customers' complaints about PPI in the first 11 months of 2009 - more than three times the 2008 total.A final verdict will be made in July. If it upholds its provisional decision, the Commission will move to introduce the full package of measures as swiftly as possible, it said.